Asia capro price outlook mixed
Asian caprolactam (capro) spot (see Spot) prices were assessed in a wider range this week on firmer deals and buy-sell ideas. Major players are setting their prices on a modest increase, while traders were more aggressive in hiking their offers.
A majority of Asia August contract prices in Taiwan and China were settled by northeast Asian suppliers at $3,400/tonne and $3,425/tonne respectively against offers at $3,450/tonne CFR NE Asia, though some remaining negotiations are still ongoing, company sources and major traders said. (see Contract)
Many speculative traders are in the market to seek cargoes as they believe capro prices will not have a big risk of falling and even have the potential to rise in the second half of this year.
This is because there will be no major additional capro capacity expansion in the near term, moreover, there will be some new downstream nylon chips plants that will come on stream in the following months. Turnarounds at Asian major plants are forecast to take considerable volumes out of the market during the fourth quarter. Furthermore, it was largely expected that prices will rise ahead of the traditional peak season in September.
Some players have been buoyed by the belief that pricing bottomed out in early June, and higher prices will be supported as supply is set to become considerably tighter.
On the downside, end-users from the nylon and tirecord segment did not snap up cargoes actively. Most downstream nylon chip makers were also in a cautious mode due to concerns over the poor conditions in the downstream yarn segments. This was despite these producers passing on the rising capro costs to them. Most downstream yarn makers continue to grapple with the high feedstock costs and have seen little success in raising their yarn prices.
The prevailing spot discussions levels seem to be edging close to the $3,700/tonne price mark that a major Chinese domestic producer had forecasted in March, as the highest price for the year. Hence, some market players cited concerns that there might be a downward adjustment before the Chinese holidays in mid Sept or October. The reasons for the decrease are that spot prices had been described as ‘rising too fast’ and ‘too high’ since early June.
Spot
Prices were assessed as $30-50/tonne higher this week at $3,530-3,600/tonne CFR NE Asia/CFR China/Taiwan, reflecting deals, bids and offers heard in the week ended Wednesday.
Early this week, bids were at $3,560-3,570/tonne CFR China on an LC 90-day basis for cargoes loading in early September, against offers at $3,600/tonne CFR China. Discussion levels were largely heard among traders.
On Monday, one sole Belarus-origin cargo for mid September shipment was purchased at $3,580/tonne CFR China on a prepayment basis, equivalent to $3,610/tonne CFR China on a LC 90 day basis. But this was considered unrepresentative of the broader market, and was not considered in this week’s assessment.
Ukraine-origin material was offered at $3,600/tonne on a LC 90 day basis, but no deals were done.
One major Russian seller settled cargoes on Tuesday at $3,530-3,540/tonne CFR China to endusers, against offers at $3,550-3,560/tonne CFR China for early September loading.
From Monday, offers of deep sea origin parcels edged up to as high as $3,620-3,650/tonne CFR China on a LC 90 day basis. Bids were heard largely ranging around $3,570-3,580/tonne CFR China. Only a sole bid was heard as high as $3,610/tonne CFR China on a LC 90 day basis, but this was considered unrepresentative of the broader market, and thus not considered in this week’s assessment.
Most players were not keen to settle below $3,600/tonne CFR China on a LC 90 day basis in the week ended Wednesday.
On a separate note, prompt shipments and bonded warehouse cargoes were priced at $3,600-3,620/tonne CFR China now, most market players said.
Domestic prices in China are higher by yuan (CNY) 300/tonne higher on the low end of the range at CNY28,300-28,500/tonne EXW.
No spot trade in Taiwan were located, as most players were in the final stages of finalising their August contract negotiations. Furthermore, spot prices are significantly higher than contract prices, and this kept buying appetite low.
However, price ideas were in line with those in the China market and hence were assessed $30-50/tonne higher this week at $3,530-3,600/tonne CFR Taiwan.
Contract
Asia August capro contracts were largely settled at $3,400/tonne and $3,425/tonne respectively, though some remaining negotiations are still ongoing, company sources and traders said.
Meanwhile, prices for the remaining contracts by overseas suppliers were heard discussed at $3,420-3,430/tonne CFR NE Asia.
These suppliers said that a price of $3,400/tonne is too low, as supply in Asia remains tight and prevailing spot prices were almost $150-200/tonne higher now.
Offers emerged on 21 July at $3,450/tonne CFR NE Asia, they added.
The remaining negotiations are expected to be finalised by the end of this week or by early next week, market players said.
July contracts in Taiwan and China were finalised at $3,250/tonne CFR NE Asia, against offers at $3,300/tonne CFR NE Asia.
Outside Asia
The force majeure (FM) on supplies of capro at UBE Chemical Europe’s Castellon plant in Spain remains in place, company sources said. It is unclear when the FM will be lifted.
Downstream
Downstream nylon chip prices rose by $30-50/tonne week on week to $3,630-3,680/tonne CFR China during the week ending 26 July.
Production news
China’s Zhejiang Hengyi Caprolactam plans to start up a 200,000 tonne/year caprolactam (capro) plant at Hangzhou in Zhejiang province by mid-April 2012, a company source said.
The yuan (CNY) 3.6bn ($559m) plant will include two lines, each with a capacity of 100,000 tonnes/year, said the source.
Construction of the plant began in early July 2010. The completed plant will help meet the strong demand in China, as the country currently secures more than half of its capro requirements from overseas, the source added.
Zhejiang Hengyi Caprolactam is a joint venture between Hengyi Petrochemical and Sinopec’s subsidiary Baling Petrochemical, said the source, who declined to disclose each party’s stake in the company.
Taiwan’s Formosa Chemicals and Fibre Corp (FCFC) has started up its new 5,000 tonne/month nylon (polyamide) chips plant at Dongnai province in Vietnam, a company source said on Tuesday.
The nylon chips plant is running at “normal rates” after its start-up last week at the end of July, the source said.
Some of the output from the nylon chip plant will be for captive use at the company’s 4,000 tonne/month textile yarn line at the same site that was started up in February this year, the source said.
The rest of the product is for export to China, said the source, as there are no antidumping duties (ADD) imposed on the product from Vietnam.
Most major Taiwan-based nylon chips producers have to pay an ADD of 4.0–4.3% when they export products to China, based on a ruling made by China’s Ministry of Commerce.
The company’s nylon chips and nylon fibre facilities in Taiwan are unaffected by the recent outages at Formosa group’s facilities in Mailiao, as they are situated in a separate location. FCFC’s nylon facilities are in Changhua, the western side of Taiwan.
The outages have also not affected the supply of caprolactam (capro) as the feedstock is sourced from imports.
FCFC’s nylon fibre units in Taiwan are running at close to 100%, said the source.
($1 = CNY6.44)
This week on ICIS news ( www.icis.com)
02-Aug-11 16:51 Poland's PKN Orlen wants Anwil fertilizer, PVC offers by end of year
02-Aug-11 11:02 Asia August capro settles around $150 higher this week
02-Aug-11 09:54 Taiwan's FCFC starts up nylon chip plant in Vietnam
01-Aug-11 11:32 China’s Zhejiang Hengyi Caprolactam to start up plant in 2012
01-Aug-11 10:57 Japan’s Ube Industries Q1 net profit nearly triples to Y5.01bn
